Market Milestones: HODL the Line

The SPY and QQQ saw some intraday selling on Thursday, but by the close, bulls had driven them back near the open, finishing with bearish hammers. The bulls keep showing up where they need to and are relentlessly buying the dip. SPY looks ready for another wave higher into the $630 region. A gap-up or a strong bullish candle will be needed for some momentum to push this move forward. A few of the Magnificent 7 sit at precarious levels where a bullish gap could kick off their next leg higher, most notably GOOGL, TSLA, NVDA and MSFT. If, instead, these names and the rest of big tech gap down, SPY could see one more solid retest before a nice move higher into summer.

GOOGL

As we stand right now, SPY, QQQ, and BTC charts all have me leaning cautiously bullish. BTC has been holding key support levels for months, and SPY’s Thursday low bounced exactly where it needed to. Key support on SPY is $603.00, and BTC’s key level is $92,000. A breakdown below those levels could trigger a sharp flush lower, creating a strong buying opportunity. As long as those supports hold, the market looks set to continue its slow grind higher.

SPY

I know I talk about Bitcoin a lot—probably too much if you’re not a fan—but get ready for another Bitcoin-heavy newsletter. IBIT remains my favorite vehicle for simple and easy Bitcoin exposure, and realistically, it’s the ETFs along with Strategy (MSTR) that are driving Bitcoin’s price action right now. On that note, how wild is it that Strategy (MSTR) will soon hold 500,000 Bitcoin? Even crazier, if the U.S. Strategic Bitcoin Reserve bill passes in its purest form, the U.S. could be buying as much as 1 million Bitcoin over the next several years. This is the next major catalyst Bitcoiners are betting on and if it doesn’t happen, we could see a severe correction. However, don’t get too bearish just yet as Bitcoin isn’t short on bullish catalysts right now.

Texas, the eighth-largest economy in the world, is pushing for its own strategic Bitcoin reserve, with plans to buy $500 million worth per year. At least 31 states have introduced similar bills, making a federal adoption even more likely. Adding to the bullish case, Howard Lutnick, a major Bitcoin holder with hundreds of millions in BTC, was just confirmed as the new Secretary of Commerce.

IBIT

As mentioned above IBIT remains a great option for direct Bitcoin exposure, and it’s arguably even better than spot Bitcoin for many people. Since IBIT became the most successful ETF launch in history, a wave of new products has followed. One that caught my attention is the NEOS Bitcoin High Income ETF (BTCI). Generally, I avoid high-income covered call ETFs, but I occasionally dabble for exposure and fun.

BTCI is an interesting product, possibly more so than some of the newer downside protection ETFs from Calamos (CBOJ, CBXJ, CBTJ). Those are worth considering for investors who want built-in risk protection, though I believe stops and protective puts work just as well—if not better—which is why BTCI intrigues me more. It’s currently set up to yield a 30% annual distribution, paid out monthly through covered call sales.

Diving into BTCI’s structure, is fascinating—not because it’s unique in the covered call ETF space, but because Bitcoin’s inherent volatility provides substantial premium opportunities. BTCI allocates 24% of its funds to HODL, the VanEck Bitcoin ETF, for direct upside exposure. It also establishes synthetic long positions by selling puts and buying calls at the same strike price. These synthetic longs are then used to sell covered calls against in order to generate the monthly income.

The fund charges a 0.98% expense ratio, which is high, but if it achieves a near-30% distribution rate, that’s a reasonable trade-off. Traders could mirror this strategy independently using IBIT and its options chain or simply buy BTCI and let the fund execute it for them. Synthetic longs work well in bullish or sideways markets but can be rough in bear markets. I plan to pick up a few shares of BTCI to see how it performs. For what it’s worth, the counterparty risk here is higher than that of IBIT, a BlackRock product. If you’re interested in tracking the synthetic longs I’ll be entering on IBIT over the coming months, make sure to subscribe to our RLT Newsletter.

BTCI

One final note on Bitcoin at this level: while the bulls have fiercely defended the $92,000 support, a flush lower into the $80,000 range is still very possible. That said, barring a black swan event, I don’t see Bitcoin dropping much below $80,000 at this stage of the cycle. If we do see a price that starts with an 8, it will likely be the last true buying opportunity of this cycle. I also believe Bitcoin and SPY will move together in this next leg—whichever direction that may be—so keep a close eye on BTC, especially over the weekends.

BTCUSD